Focused questions

Question 1

Theft of personal property can only be included by…

Answer 1

Endorsement

Question 2

The limit for medical coverage on a personal auto policy is not more than $____ per person, per accident.

Answer 2

$5,000

Question 3

This is a method of casualty claim settlement used when the insured and insurer cannot agree on how to settle a claim.

Answer 3

Arbitration

Appraisal is the AMOUNT of the claim, Arbitration is HOW to settle a claim

Question 4

The policy provision found in property insurance policies that prevents the insured from collecting twice for the same loss is called

Answer 4

Subrogation

Question 5

Under the personal auto policy, liability for bodily injury resulting from the insured’s use of a nonowned automobile is

Answer 5

Provided by the insured’s policy on an excess basis.

Automobile insurance follows the insured auto, so the coverage written on the auto is primary. Automobile insurance also follows the insured as excess over other collectible insurance.

Question 6

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as?

Answer 6

Consideration
Consideration is something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and the representations made in the application.

Question 7

Rental Reimbursement is only available if the personal auto policy includes which coverage?

Answer 7

Other Than Collision Coverage
This endorsement is only available if the policy includes other than collision coverage. This endorsement will reimburse the insured for rental charges incurred because the covered auto is out of use because of a covered loss.

Question 8

Property insurance that provides $100,000 coverage for a building and $50,000 coverage for personal property at a single location is called

Note: You got this specific one wrong on both attempts

Answer 8

Specific coverage

One location is insured for a specific amount of insurance on the structure and contents.

Question 9

The Gramm-Leach-Bliley Act was passed to

Note: This one was wrong for both attempts also

Answer 9

Protect private customer information filed with a financial institution

Question 10

The part of the insurance contract that describes the covered perils and the nature of coverage of the contractual agreement between the insurer and the insured is called the

Answer 10

Insuring agreement.
The insuring agreement is the part of the policy structure that describes the insured perils and the method of indemnification.

Question 11

A property insurance policy that is not subject to any coinsurance requirements but has a set amount of insurance scheduled for the property would use what loss valuation method?

Answer 11

Stated amount
A stated amount is an amount of insurance scheduled in a property policy which is not subject to any coinsurance requirements in the event of a covered loss.

Question 12

Earthquake coverage is commonly provided through a federally-funded program, true or false?

Answer 12

True
It is a peril excluded by most standard property forms. Coverage for the peril of earthquake may be added by endorsement to most property policies, or coverage may be written in a Difference in Conditions policy.

Question 13

The process of determining the premium charged and how much insurance is required for a particular loss is called

Answer 13

Loss valuation
Loss valuation is the process of determining appropriate monetary value to a particular loss and its resulting repair or replacement.

Question 14

Personal umbrella liability provides errors and omissions coverage for an agency, true or false?

Answer 14

False
Personal umbrella policies cover the personal exposure of the insured. Errors and omissions coverage is provided only in a professional liability policy.

Question 15

In a personal auto policy, the medical payments coverage is similar to

Answer 15

Accident insurance, because it pays medical expenses regardless of fault.

Question 16

The limit on silverware on broad theft coverage is $____

Answer 16

$2,500

Question 17

This type of liability is imposed on defendants engaged in hazardous activities.

Answer 17

Strict liability

Question 18

A vehicle fleeing a hit-and-run accident is…

Answer 18

An uninsured vehicle

Question 19

Replacement cost is defined as

Answer 19

Full replacement of property at its current cost, new and without reduction for depreciation.

Question 20

Which of the following homeowners policies covers those who rent their dwelling?

Answer 20

HO-4

The personal property of a tenant is covered by the HO-4 policy.

Question 21

The insured damages a rented garage when he failed to stop in time, how would it be covered under a personal auto policy?

Answer 21

Property Damage Liability

Question 22

Which entity has the authority to grant a temporary life insurance agent’s license?

Answer 22

The Commissioner of Insurance only

Question 23

A participating insurer may pay dividends to the policyowner, true or false?

Answer 23

True
A participating insurance policy will pay dividends to the owner based upon actual mortality cost, interest earned and costs.

Question 24

In Texas, unless higher optional limits are purchased, the maximum amount payable for all auto personal injury protection benefits arising out of a single accident shall not exceed $____

Answer 24

$2,500

Question 25

Is attempting to settle a claim in which liability is clear an unfair or deceptive act? True or false.

Answer 25

False.

Question 26

An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. What is this practice called?

Answer 26

Unfair Discrimination
It is illegal to participate in any boycott, coercion, or intimidation that is intended to restrict fair trade or create a monopoly

Question 27

An insurer must acknowledge receipt of a Notice of Claim within how many days?

Answer 27

15
Under state Claims Methods and Practices laws, every insurer, upon receiving a notification of a claim must acknowledge its receipt and begin an investigation within 15 working days.

Question 28

A recent college graduate bought a new car and is trying to get automobile insurance on it as required by the lienholder. After being rejected by several insurance companies due to his driving record, he finally talked to an agent who can get him coverage. His agent called him a residual market risk. From which type of automobile insurance plan can the applicant purchase insurance?

Answer 28

Assigned risk

Question 29

All property losses under the basic form are settled on a replacement cost basis. True or False

Answer 29

True

Question 30

What does the term proximate cause refer to?

Answer 30

Negligence that leads to an injury

Question 31

Is a coin collection valued at $500 lost in a fire covered by a homeowners policy?

Answer 31

No.
An HO policy will pay up to $2,500 for silverware by theft, $1,500 for boats, motors, trailers, $1,500 for loss of trailers not used with boats, but no more than $200 for coins.

Question 32

The Federal Fair Credit Reporting Act

Answer 32

Regulates consumer reports

Question 33

An insured has $5,000 of medical coverage on a personal auto policy at the time of a covered accident. The insured and two passengers are injured. Medical treatment costs $7,000 for the insured, $4,000 for the first passenger, and $8,000 for the second passenger. How much will the policy pay under medical payments coverage?

Answer 33

$14,000

The limit is not more than $5,000 per person, per accident.

Question 34

When must Insurable interest in a property policy be proven

Answer 34

At the time of loss.
Between the time a policy is issued and when a loss occurs, ownership may have changed, mortgages may have been put into place, etc. Therefore, in property and casualty insurance, insurable interest must exist at the time of loss.

Question 35

Under the professional liability loss settlement provision, what must an insurer do before offering to pay a claimant to settle a claim?

Answer 35

Get the insured’s consent
If a claim has been filed under a professional liability policy, an insurer MUST get the consent of the insured before offering to pay to settle a claim. If the insured’s professional reputation is at risk, and the insured feels he or she is not negligent, the insured can require the insurer to defend the action in court.

Question 36

What type of compensatory damages will pay for pain and suffering and disfigurement?

Answer 36

General

General compensatory damages are for intangible elements that cannot be specifically measured in terms of dollars.

Question 37

An insured is driving her car through a residential area when she loses control and crashes into a neighbor’s front porch. The neighbor, who was sitting on the porch, is injured. The insured’s liability policy has a limit of $500,000. This amount applies to the total of damages for any bodily injury and property damage resulting from one accident. Which type of limit of liability does the insured have

Answer 37

Combined single
Combined single is a single dollar limit of liability applying to the total of damages for bodily injury and property damage combined resulting from one accident or occurrence.

Question 38

Which of the following is a common exclusion found in Part D: Coverage for Damage to Your Auto of a PAP?

Answer 38

Mechanical breakdown
Damage due to wear and tear, freezing, mechanical or electrical breakdown, and road damage to tires is a common exclusion to the physical damage coverage section.

Question 39

Are conditions part of the policy structure or an element of the contract?

Answer 39

Conditions are part of the policy structure

Question 40

An insured’s roof cost $4,000 when installed 5 years ago. It has been damaged by hail and must be replaced. The new roof will cost $6,000 at today’s prices. If the roof has been depreciating at $200 per year and the insured’s policy is written on the actual cash value(ACV), how much will the policy pay toward the insured’s new roof?

Answer 40

$5,000

ACV is calculated as replacement cost less depreciation.

Question 41

What is the deductible of a personal liability umbrella policy called?

Answer 41

The self-insured retention (SIR) is an initial part of a loss the insured pays before the umbrella pays if no other policy covers the loss.

Question 42

An agent holds an insurance license in the state of Kansas and would like to transact insurance in Texas. The agent became licensed before written examinations were required. Therefore, the agent has not actually passed any kind of examination. Does a written examination needed?

Answer 42

If a currently-licensed, foreign agent obtained an insurance license before written examinations were required, and if the agent seeks to transact insurance in Texas, the written examination requirement will be waived.

Question 43

An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice?

Answer 43

Illegal
It is illegal to participate in any boycott, coercion, or intimidation that is intended to restrict fair trade or create a monopoly.

Question 44

Are all property losses under the basic form are settled on a replacement cost basis?

Answer 44

Yes, all property losses under the basic form are settled on an actual cash value (ACV) basis.

Question 45

What must an insurer obtain in order to transact insurance within a given state?

Answer 45

Certificate of authority
All insurers (domestic, foreign, or alien) must obtain a certificate of authority before transacting insurance within a given state.

Question 46

Is the State Property and Casualty Guaranty Association a residual market?

Answer 46

No.
FAIR plans, assigned risk plans, and a joint underwriting association are all considered residual markets. The state Guaranty Association is a mechanism for assisting the policyholders of bankrupt insurers and would not be called a residual market.

Question 47

Who are members of the Texas Windstorm Insurance Association?

Answer 47

All authorized property insurers

The association is made up of all property insurers authorized to transact property insurance in the state.

Question 48

Is breaking of glass included in basic form (DP-1) dwelling?

Answer 48

No, it is included in DP-2 and DP-3 only

Question 49

Are visiting relatives considered INSUREDS under the liability section of a homeowners policy?

Answer 49

No. Relatives of the insured of any age are considered insureds only if they are residents of the household.

Question 50

Is the coinsurance formula applied to total losses?

Answer 50

No. In the event of a total loss, the coinsurance clause does not operate and the face amount of the policy is paid.

Question 51

When an individual obtains an insurance license for the primary purpose of writing insurance on him- or herself, or for members of his or her immediate family, or business, this is called

Answer 51

Controlled business
When producers sell policies on themselves, their family, or their coworkers, this is called “controlled business.” In this state, at least 25% of a licensee’s total volume of premiums in a calendar year must be from business other than controlled business.